The monthly bills of typical Dominion Virginia Power residential customers could fall by about 4 percent by Sept. 1 thanks to significant reductions in fuel and transmission-related costs.
The larger of the two decreases proposed by the company today is a $5.83 drop in the monthly bill of its typical Virginia residential customer because of lower-than-expected prices for fuel used to generate electricity, abnormally mild weather and the performance of new generating units. If approved by the Virginia State Corporation Commission (SCC), this would be the fifth decrease in the fuel rate in the last three years and the largest single fuel rate decrease since 1998.
If the SCC approves all pending adjustments, the monthly bill of a residential customer who uses 1,000 kilowatt-hours each month would decline from an estimated $110.24 this month to $105.90 on Sept. 1 – a 3.9 percent decrease – and lower than the typical monthly bill was on Jan. 1, 2009.
“The mild weather that Virginia has experienced since last summer was not expected when the fuel rate was set last year,” said Dominion Virginia Power CEO Paul D. Koonce. “The abundance of natural gas also has driven the price down, and we have taken full advantage of this at our new Bear Garden Power Station. This highly efficient, natural gas-fired station is projected to save our customers approximately $122 million in fuel costs from June 1, 2011, through June 30, 2013, when compared with other fuel sources.”
The fuel rate decrease itself will more than offset three small rate increases. The other rate adjustments to the typical bill between now and September are:
– An increase this month of an estimated 34 cents to cover the costs of energy efficiency programs approved Monday by the SCC.
– An increase of $1.32 once the Virginia City Hybrid Energy Center in Wise County begins commercial operations, forecast to occur this summer. The SCC split the April 2012-March 2013 rate year for the clean coal-technology and biomass power station to begin recovering operating costs when the station enters commercial service. The typical monthly bill initially was reduced in April by 31 cents to recover pre-commercial service financing costs for this power station.
– An increase of $2.84 on Aug. 1 with the expiration of a credit to customers that was a result of the SCC’s review of base rates. The credit has been applied to customers’ bills since February.
– A proposed decrease of $2.67 on Sept. 1 because of changes to transmission-related costs.
“We continue to work hard to hold down expenses while focusing on projects such as highly efficient power stations, renewable energy and technology enhancements that provide further cost savings for our customers while improving reliability,” Koonce said.
The fuel rate is a pass-through cost with no profit to Dominion. This rate is adjusted annually, usually on July 1, to recover what Dominion Virginia Power spends on fuel at its nuclear, biomass, coal, natural gas and oil electricity-generating units as well as power it purchases from the wholesale market. The rate also includes the projected cost of fuels during the next 12 months.
To illustrate the change in fuel prices, Dominion’s SCC application shows that the 12-month forward price for natural gas last March 31 was $4.84 per 1 million British thermal unit (mmBtu), while the same fuel this March 31 was $3 per mmBtu. More recently, the price has fallen to the $2/mmBtu range.
Between 2011 and 2016, Dominion Virginia Power has added or plans to add about 3,200 megawatts of new natural-gas fired generation. The newest natural gas-fired power station under construction, Warren County Power Station, is projected to provide customer savings of approximately $1.187 billion over its life.
Dominion Virginia Power is a subsidiary of Dominion (NYSE: D).